Serbia’s President Vucic bets economy will avoid Covid-19 recession
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Serbia could be one of the few countries in Europe to escape an outright recession in 2020, forecasts President Aleksandar Vucic. This he attributes to the country having contained coronavirus with a severe but relatively brief lockdown.
Mr Vucic says he expects Serbia to eke out an economic expansion of 0.5 to 1 per cent this year. Most other European countries are in the throes of the worst decline since the second world war.
“It’s going to be tougher, it’s going to be harder,” says the president. “But anyway, I think that we will make it better than most of the others.” In other forecasts for Serbia, however, the EBRD and the IMF anticipate contractions of 3.5 per cent and 3 per cent respectively.
Mr Vucic views his record on the economy and public finances as a trump card for his centre-right SNS party with parliamentary elections due on June 21, delayed from April by Covid-19. The SNS is expected to tighten its grip in parliament given that some opposition parties are boycotting the poll.
As president, Mr Vucic has limited formal powers. But he towers over Serbian politics and brooks little dissent, much like his fellow authoritarian democrat in the region, Hungary’s Viktor Orban.
Mr Vucic says the economy will be cushioned by public investment and emergency payments to Serbian households this year. But public sector debt as a proportion of GDP will “never, ever go above 60 per cent”, he insists.
Serbia has become increasingly anchored in European manufacturing supply chains and receives the lion’s share of foreign direct investment in the western Balkans. Its cheap but skilled labour is attractive to foreign business.
Serbia recorded GDP growth of 4.2 per cent last year and 4.4 per cent in 2018. It has a lively IT sector. But unemployment — more than 10 per cent before the pandemic — is high, despite the fact that its population of 7m, is shrinking as a result of a low birth rate and high migration. The economy is marred by poverty and corruption.
Mr Vucic, who was prime minister for three years before winning the presidency in 2017, is a former hardline nationalist who moderated his stance to support EU membership for Serbia.
But he has struck an often ambivalent and sometimes hostile attitude to the union.
In March, after Brussels instigated a permit regime for exports of medical equipment, he lashed out at the EU. Its sense of solidarity did not exist and was a “fairytale”, he said. The EU has given more than €3.6bn of aid to Serbia in the past two decades. This includes €200m in medical and economic assistance to help counter the pandemic.
Mr Vucic vigorously defends his position. “Someone was excluding Serbia and some western Balkan countries from the possibility of getting very important medical equipment for our people,” he says, “we felt left alone.”
Mr Vucic, meanwhile, has lavished praise on China, which he has courted in recent years. Chinese companies have invested in Serbia’s steel, mining and infrastructure. Huawei, which has been awarded a 5G contract, installed mass surveillance equipment in Belgrade.
He has sought to use relations with China, some observers suggest, to gain positive EU attention. Germany is impatient with his inability to deliver a deal on Kosovo, the majority Albanian former Serbian province which declared independence in 2008.
“Even if his statement about EU solidarity was an emotional outburst, it is to some degree what has been going on for a long time in Serbia,” says Florian Bieber, director of the centre for south-east European studies at Graz university in Austria. Mr Vucic “has not been building support” in Serbia for integration with the EU, he adds.
Mr Vucic argues that in the wake of the pandemic he had no choice but to turn to China. It sent the medical supplies that Serbia needed, he says, and Chinese medical advisers for example helped to instigate mass testing.
Serbia recorded 250 deaths and 11,896 confirmed cases of Covid-19 by June 8. Most of the infection came from the 400,000 Serbs who returned in March when EU countries went into lockdown.
Mr Vucic promises to stick to the path of EU accession, given Serbia’s growing dependence on European trade.
But negotiations with Brussels have stalled and concerns are growing about democratic backsliding in Serbia and a fraying of the rule of law. For example, Freedom House, the US-based non-profit organisation that monitors political freedom and human rights, said Serbia, Hungary and Montenegro, no longer had a “partially-consolidated democracy”. Instead, these countries now had “governments in transition or hybrid regimes”. In Serbia’s case, it cited years of “abuse of power, and strongman tactics” by Mr Vucic.
The trends are worsening, says Aleksandra Tomanic, executive director of the European Fund for the Balkans foundation in Belgrade. A journalist was arrested during the pandemic for reporting on the seriousness of the situation — the first such case in 20 years. Some government officials, Ms Tomanic adds, had initially made light of Covid-19 as a “silly virus”.
“We will do our best to change ourselves,” says Mr Vucic in response. He pinpoints judicial reform as “of utmost importance not just for the citizens of Serbia but for attracting foreign direct investors”.
Serbia has been responsible for delays and mistakes in meeting conditions for EU membership, he concedes. But he also says the EU is ambivalent about admitting new members. Mr Vucic has been “steadily moving public opinion away from EU integration”, says Mr Bieber, so “he is no longer dependent on it” as his top political priority.
The unresolved status of Kosovo remains a big block to Serbia joining the EU. Despite renewed US and European efforts to spur an agreement, Mr Vucic is gloomy, arguing that a breakthrough requires “that Albanians are not the only side that is going to be content”.
Western diplomats, he adds, are only talking about technicalities, not the substance of a solution.
“Show me your plan, show me your proposal,” he says. “I cannot hear it and I don’t see it. But I’m ready to listen.”
As young entrepreneurs drive Belgrade’s vibrant start-up scene, President Aleksandar Vucic courts China and gains EU attention, plus, calls for structural reform, and regional integration closer to home